Correlation Between Methode Electronics and LG Electronics
Can any of the company-specific risk be diversified away by investing in both Methode Electronics and LG Electronics at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Methode Electronics and LG Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Methode Electronics and LG Electronics, you can compare the effects of market volatilities on Methode Electronics and LG Electronics and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Methode Electronics with a short position of LG Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Methode Electronics and LG Electronics.
Diversification Opportunities for Methode Electronics and LG Electronics
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Methode and LGLG is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Methode Electronics and LG Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Electronics and Methode Electronics is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Methode Electronics are associated (or correlated) with LG Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Electronics has no effect on the direction of Methode Electronics i.e., Methode Electronics and LG Electronics go up and down completely randomly.
Pair Corralation between Methode Electronics and LG Electronics
Assuming the 90 days trading horizon Methode Electronics is expected to generate 2.71 times more return on investment than LG Electronics. However, Methode Electronics is 2.71 times more volatile than LG Electronics. It trades about 0.08 of its potential returns per unit of risk. LG Electronics is currently generating about -0.03 per unit of risk. If you would invest 840.00 in Methode Electronics on August 29, 2024 and sell it today you would earn a total of 55.00 from holding Methode Electronics or generate 6.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Methode Electronics vs. LG Electronics
Performance |
| Timeline |
| Methode Electronics |
| LG Electronics |
Methode Electronics and LG Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Methode Electronics and LG Electronics
The main advantage of trading using opposite Methode Electronics and LG Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Methode Electronics position performs unexpectedly, LG Electronics can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in LG Electronics will offset losses from the drop in LG Electronics' long position.| Methode Electronics vs. ALGOMA STEEL GROUP | Methode Electronics vs. LEGACY IRON ORE | Methode Electronics vs. NEWELL RUBBERMAID | Methode Electronics vs. Sumitomo Rubber Industries |
| LG Electronics vs. Apple Inc | LG Electronics vs. Apple Inc | LG Electronics vs. Apple Inc | LG Electronics vs. Apple Inc |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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